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VIPKid – “Ubernization” in EdTech

Uber matches drivers and riders. An EdTech startup matches students in China with English teachers in North America via its live streaming platform.

With the rise of middle class and growingly anxious parents, China’s K12 online education market reached a size of $4.4 billion in 2017 and CAGR of over 30% since 2012.[1] VIPKid, an EdTech platform founded in 2013 in Beijing, matches K12 students in China with teachers in North America for real-time English tutorials. VIPKid currently connects over 500,000 paying students with over 60,000 teachers.[2]

Function of the Platform

From HBS Digital Initiative

Similar to how Uber matches riders and drivers, VIPKid’s virtual classroom allows a student in China to have a 1:1 live session with a teacher in the United States (see Chart 1). The curriculum is based on the U.S. Common Core State Standards.[3] Students pay on average $3000 annually to enroll in VIPKid’s curriculum.[4] Teachers get paid at $14-22 hourly rate depending on assessment and reviews.[5]

VIPKid tapped into a market segment where parents couldn’t afford international school’s tuition yet still want their kids to have customized learning experience taught by native English speakers. Existing offerings such as lectures or 1:1 offline tutoring are either ineffective or expensive. VIPKid came in to address this market segment.

Product: Immersive learning experience at affordable rate

Prior to taking the course, students will go through an initial test to assess their English level followed by course recommendations. The preview animation videos in each module raise kid’s interest in the class. After each class, kids will be asked to do the review in the form of games.[6] This product offering ensures that kids have an immersive learning experience that’s effective and fun.

Highly selective faculty

Teachers at VIPKid have to go through a series of interviews and background check before officially onboard. Besides, VIPKid requires all teachers to obtain the TESOL (Teaching English to Speakers of Other Languages) certificate.[7] Teachers are constantly evaluated by parents for performance.

Flexibility: Students can schedule a class whenever and wherever convenient.

Access to native speakers: Students at VIPKid have access to native English speakers in North America to learn both pronunciations and cultures.

For teachers

Flexibility: Teachers can work from home and manage their own schedule.

Make money while having fun: Teachers can use their free time to make money and enjoy interactions with students globally.

Skip course planning and grading: Lesson plans are provided by VIPKid. Teachers just need to review the material a few hours before a class.

Value Capture

User acquisition

VIPKid’s referral scheme encourages teachers to refer teachers, and parents to refer parents to grow its user base both on the supply side and demand side. VIPKid also spent aggressively on PR to build its premium brand image. For example, Kobe Bryant was invited as VIPKid’s spokesman.[8]

Technology

VIPKid’s platform is fueled by its strong technological capability. Its network system “Starry Cloud” installed five transpacific cables to ensure streaming quality and keeps latency under 200ms.[9]

Capital

Backed by leading investors such as Coatue Management, Sequoia Capital and Tencent, VIPKid received checks that totaled $825 million since 2013.[10] The most recent round in April 2018 valued the company at over $3 billion.[11]

The Road Ahead

In 2017, VIPKid launched Lingo Bus, a product focused on teaching Mandarin to kids globally.[12] We can imagine how similar products could be launched for other language vectors — for example, teaching French to a Japanese student. VIPKID’s potential might just be at the tip of the iceberg.

6 thoughts on “VIPKid – “Ubernization” in EdTech”

This is quite interesting. A simple solution with a great impact. However, I can see a direct competition with fully automated apps like Babbel which are much cheaper and more convenient to use. Although the big differentiator here is face to face tutoring but I am not sure if this factor would be good enough for parents to enroll their child in this program which although affordable but still costs a big chunk of money.

Very interesting. This reminds me of Andella — which focuses on training software developers in emerging markets, and matching them with employers domestically or abroad. Similarly, this solution solves a labor market mismatch.

That said, I agree with Gaurav’s point that this instance of rightsizing mismatch maybe be more vulnerable to advances in ML/AI, etc.

It’s a very nice surprise for me to read through your blog. I have seen ads of VIPKid before but have never learned what they really do. Thanks for the very informative summary of this platform. I love your thoughts on how this platform could expand by connecting the rest of the world’s demand together.

A thought over this platform. $3000 a year converted in to CNY is not a small amount for majority of the families in China. This platform might be targeting the middle class families in China but I think with the majority of the population in China who may need a second thought on joining this platform because of the cost, it might also be beneficial if VIPKid opens courses for a few kids at the same time to lower the cost like having a “uber pool” of the classes.

Thank you very much for sharing! I have a couple of friends who are tutors in VIPKid, and they both are passionate about their experiences interacting with Chinese children, as well as for the flexibility of VIPKid system and the user-friendly interface that manages their interactions.

During my time living in Japan, several of my military spouse friends also worked in similar ventures, with the difference that their interactions were coordinated to be in-person, and were between 40-45 USD an hour. Even with these high prices, the demand for native-speaker instruction was very high. I was thus not surprised to see the announcement in August of 2018 that VIPKid was expanding its services to Korea and Japan, which are countries with much higher median income than China.

While I agree that Babbel, Duolingo, and similar services could make language education a lot more accessible and affordable, I still think that there will always be value to face-to-face instruction – especially for aspects which require practice and imitation such as pronunciation. I am thus not as worried about the (immediate) future of VIPKid.

Extremely fascinating article, and an excellent example of value creation enabled by this platform. My main thought:

I wonder whether this will expand beyond teaching English to Chinese students. While an excellent first use-case, I see potential for massive opportunities to expand to other languages and subjects. Seems like a great alternative for kids and parents to learn in a quality, cost-efficient manner.

Thanks very much for such an interesting article, Li! I have heard of VIPKid before and I agree with previous comments addressing the development of trust and value proposition surrounding face-to-face language instruction. I wonder if there is a possibility to make this a true peer-to-peer platform in which virtual language “pen pals” develop and not only are Chinese student being taught English, but English instructors are also able to learn Chinese.